Maximizing Coverage Under the 'Cause Test'

The determination of the number of occurrences that arise under an insurance policy can have a profound effect on the availability of coverage, from the perspective of the policyholder, or upon the limitation of coverage, from the perspective of the insurer. Although the stakes can be enormous, the math is fairly simple. Consider a policyholder that faces a large liability arising from a substantial number of small claims. If the policyholder has a coverage program that provides a low per-occurrence deductible or self-insured retention, or no per-occurrence deductible or self-insured retention, a judicial determination that there are many occurrences likely will have the effect of maximizing the policyholder's recovery. On the other hand, if that same policyholder has a coverage program with a high per-occurrence deductible or self-insured retention, which may exceed the amount of most if not all of the single claims, a judicial determination that the claims constitute a single occurrence likely will maximize the policyholder's recovery.

30 minute read October 30, 2006 at 03:36 PM

By

Paul A. Rose And Amanda M. Leffler